Saturday, October 4, 2008

Paulson Plan Already "Irrelevant" - Whats next for the stock market?

Just as the incredibly horrible Paulson Plan bill passed the House of Representatives on Friday, equities markets tanked.  The reality of this Bill is setting in.  I started reading parts of the 400+ pages of this monstrosity and was forced to stop due to acute nausea.  It is nothing more than a gift to special interest, does not address the root causes of the credit crisis and does nothing more than make a bad situation worse - oh yeah, it also gives the IRS new powers to invade what was left of US citizens privacy and there is some kind of tax break for toy wooden arrows....

So while the dominant downtrend gains in strength and equities prices (along with other markets) continue their slide, what will be their next move?  Bernanke will lower rates, probably half a point.  Its more of a symbolic move because rates are close to 0 anyway and the fed has been massively adding to the money supply.  When they do announce this easing (they have a meeting at the end of October), it will create another short term rally against the dominant trend that will provide yet another opportunity to increase short positions.  The equities markets will then continue to sell off (except for brief rallies such as when the Fed announces an easing).

After the election (and assuming Obama wins) there will be a rally in equities, mainly for psychological reasons, that will last throughout December and into January, which are traditionally good months - the so called January effect....  This is a rough scenario for where I see equities prices headed in the near future.... -John Bardacino

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